In other words, there is capital simply infused to do whatever the company wants to do. Whether it is to build ships, or make up losses. Therefore, the carrier, to the extent that it has approval, as I would say exists in the cast of the French, anyhow, to go after a certain position in the trade, can do so, and the consequences will be taken up.

Those are only a couple of examples. The Indonesians have state fleets, the Yugoslavs, all of the African countries have state fleets, the Israelis have state fleets. It is a pretty general world.

About the only exceptions that you could think of are some of the British lines, the German lines, the Belgian and Dutch lines, some Scandinavian, and the Americans. The rest are in a position insulated from losses due to whatever policy they care to run by.

The CHAIRMAN, Mr. Breaux?

Mr. BREAUX. Thank you, Mr. Chairman.

Thank you, Mr. Amoss, for your testimony.

I agree with you that $450 million of shipping business for a $4 million fine is not a very bad deal. I can understand how someone would be quite willing to continue that practice if the only thing they had to come up with was a $4 million fine.

You are coming out way ahead, if that is the only thing you have a fear of having done to you, if you are in violation of the law.

One of the problems in trying to stop rebating is, I guess, the real problem of having any kinds of access to any of the documents or records of foreign shippers, in particular, which would indicate that they are in fact engaged in that process. One of the sections of the bill that we are considering would have a section which, in effect, would prohibit any foreign line that is not cooperating, as far as providing documentation to the United States, from being able to call at any of our ports.

How do you think that would work? Do you think that would be a means of getting them to cooperate, or would they just thumb their noses at us?

Mr. Amoss. It could work, and I believe it will. I think to simply say that it would not work, and not to try it, is simply not to know.

I believe that you find in the civil area, and domestically, that businesses scream about how are we going to do business and comply with the kind of ethics that are demanded of us in an international way, and you do not hear that furor any more. Businessmen have found that they can do it and live with the ethical sanctions that I think have pretty generally descended upon the business community. Mr. BREAUX. Are you talking about worldwide?

Mr. Aмoss. I am talking about United States, but I extend that to worldwide, and I say that I just do not think that the fears that are exposed by those people who have to deal with foreign governments, from a government-to-government basis, in our own Government and who really do not like to face up to problems like this, that those are unfounded, and that we ought to set up something that is reasonable, and where the penalty really fits the crime, and the shoe fits those who are willing to wear it.

Mr. BREAUX. Well, I am not sure what type of penalties, we could impose upon a foreign line engaged in rebating practices. If the U.S. law says that is illegal, would we have jurisdiction to apply our laws in regard to rebating?

Mr. AмOSS. We certainly have the jurisdiction to apply our laws to a vessel that is in our ports, and in our waters, and just like we go out and take a Russian trawler who is taking fish inside the 200 mile limit, and take him to port, and hold him captive, and wait until the fine is paid, and that is pretty harsh, and people would probably have said, some years ago, my God, you cannot do that, they will threaten us with this or that, but we do it, and it is done successfully.

I think that our position is so right, and so strong, that we ought to go ahead and do it."

Mr. BREAUX. Do you think we would have a problem with verification of the documentation of foreign citizens that they would submit. to FMC, as far as rebating practices are concerned?

I can easily see two sets of documents being submitted.

Mr. AMoss. Yes, that could occur. That takes a super conspiracy, though, and I think the instances where it would occur would probably not be so substantial that you would back off for that reason.

Mr. BREAUX. I take it that you, as the president of your association, are not taking a position on the amnesty section of our legislation? Mr. AмOSS. Yes; that is correct. I am taking a position. Only as the president of Lykes.

Mr. BREAUX. As president of Lykes?

Mr. Aмoss. And on behalf of Farrell Lines, also.

Mr. BREAUX. And that position is that you would oppose that section?

Mr. AмOSS. Yes, sir.

Mr. BREAUX. And specifically why? Is it because of unfair economic advantage that we were speaking about?

Mr. AMOSS. I think it sets up a number of things, many of which we have talked about. But as I said before, I think it is unfair to those who have been taken advantage of, be they shippers or carriers. I think in the event that they have been damaged, it would seriously prejudice a recovery case if such a law existed before a judge, that it would tend to modify and mitigate the damaged situation if a carrier or shipper were to go to court under the antitrust laws about such damage, if we had a provision of that type. And I simply think it is the wrong way to go about trying to redress the wrongs.

Mr. BREAUX. One final point.

There has been testimony that seemed to indicate that there are those who believe that conferences which would allow pooling arrangements and equal access arrangements and rationalization agreements, that if that were possible to be carried out on an improved basis, one that would not take many, many months to have approved, that that would go a long way toward eliminating some of the rebating practices.

Can I have your comments on that or opinion?

Mr. AMoss. Well, certainly in many cases pooling can be effectively used. I think that there is a limit to its use, that it does not say that you can apply this universally in all trades.

Pools dealing with a trade like the Transatlantic, for instance, or the Transpacific, in which you have a number of carriers established in those trades and different nationalities dealing with, on the one hand, the U.S. commerce and, on the other hand, principally the

commerce of, say, a country like Japan, but in there you have Scandinavian, German, Indonesian, of course Japanese, Taiwanese, Hong Kong, flag vessels with Chinese crews, and trying to make a pool out of such a situation is extremely difficult. And I tend to think that, as a mandatory thing, it probably would not work. The same thing is true in the common market countries. Putting together all of these flags carrying commerce that is predominantly German, secondarily French, and certainly British, is a difficult thing to accomplish in a pool and achieve satisfaction. To do it mandatorily I think is the problem.

Mr. BREAUX. Well, I was thinking of a voluntary type of arrangement rather than a mandatory type of arrangement.

Mr. Aмoss. Yes.

Mr. BREAUX. All these things are allowed now under the Shipping Act, is that not correct?

Mr. Amoss. Well, they are allowed if they are blessed and approved and not badgered to death by the Justice Department or some interest, either governmental or

Mr. BREAUX. Are they not also subject to approval by the FMC? Mr. AмOSS. Yes; that is the approving authority. But into that arena enters all these other combatants.

Mr. BREAUX. Are those kind of delays some of the reasons why these type arrangements have not been entered into, the time delays, et cetera?

Mr. Aмoss. Well, I think so, yes. And changing conditions.

You know, the shipping industry has undergone a tremendous technological change, and you start off trying to make a pool with certain classes of carriers and certain types of ships and, 3 years later, you have a different array of ships and investments, and it becomes another problem. And those are still another type of problem that affects pools.

I think that pools work best when you have a developed trade that is predominant between the two partners as we do in many of our South American trades where, in fact, the other partner is even trying to control a certain amount of the cargo himself and that the pool is a logical way to work that situation. But the way you have free type of trade with free access on both sides by all carriers, it is a very difficult thing to work, and that is why I am just making the point that I think pools are a partial answer, never a mandatory one. And I would hope that we could find a way to have pools made acceptable by at least our own Government agencies so that the battle is only left to the commercial interests in the arena of the Federal Maritime Commission.

Mr. BREAUX. Thank you. Thank you, Mr. Chairman.

The CHAIRMAN. Thank you.

Thank you, Mr. Amoss. We certainly appreciate your testimony today.

I am going to ask Captain J. W. Clark, president of Delta Steamship Lines, Inc., to be the next witness. He does have difficult transportation requirements, and we will please ask him to be the next witness and ask the indulgence of the other witnesses.

Captain Clark, we had you scheduled for testimony at our last hearing but, unfortunately, that ran late, and we do know that you have two statements, one an update and expansion on your first statement. Both statements will be included in the record and printed in the record at this point, and we would ask you to proceed on a paraphrase of your statement, and please identify the gentleman testifying with you.

[The following was received for the record:]

SUPPLEMENTAL STATEMENT OF CAPTAIN J. W. CLARK, PRESIDENT,

DELTA STEAMSHIP LINES, INC., NEW ORLEANS, LA.

I regret that exhibit "A" as referred to in my original testimony was omitted through error. I understand that copies have been furnished to Mr. Kyros, and I am appending a copy hereto.

At the same time, I would like to briefly cover several points, which I understand have arisen during the course of the hearings, by this supplemental testimony.

First, as to the suggested revision of H.R. 9518, it has been pointed out that the control of the "agents and subagents" of a non-U.S. domiciled carrier would not preclude that carrier from appointing U.S. resident employees who, arguably, might not be such "agents and subagents." I, accordingly, would suggest that the words "agents and subagents" be expanded to read, at each point used in the suggested revision, as follows:

"Agents and subagents, as well as all employees or other representatives domiciled in the United States."

"Exhibit "A", as revised, includes this revision.

AMNESTY

Turning to the amnesty provision of the bill, I believe that it should be noted that the Sea-Land "revelation" to the Federal Maritime Commission conformed in all respects with the provisions of the bill except insofar as it was made prior to the introduction of the bill and its possible enactment. Thus, it was voluntary and, as Mr. Ragan pointed out to the committee, made at a time when there was "no hot breath" of the FMC threatening investigation of Sea-Land.

This time element, insofar as Sea-Land is concerned, appears to have been taken into account by the settlement agreement entered into between Sea-Land and the FMC, which agreement plainly was prepared in contemplation of possible legislation in the very terms proposed here. Thus, the agreement states:

"9. In the event of changes of law or other circumstances at any time during the term of this agreement, which Sea-Land believes warrant modification or mitigation of any of the requirements imposed on Sea-Land by this agreement, the Commission agrees, as an inherent part of this agreement, to Sea-Land's right to petition the Commission to this end."

I believe that Sea-Land's settlement was quite favorable to it. Any further mitigation would be wholly unwarranted.

I remain of the firm conviction that there is no quid pro quo or valid consideration of any nature for the amnesty provision. Either we had a law which all lines, including Sea-Land, were required to live by, or we did not. I don't believe that there was any doubt as to the terms of the law during the last 60 years. To tell us now that we did not have to live by it is wholly unacceptable. Mr. Hiltzheimer, at page 11 of his testimony, states:

"The bill contemplates that such penalties will be compromised and reflected in settlement agreements between the FMC and the carriers or users. The result will be more civil penalty assessments and compromises after passage of the bill then (sic) are likely to be achieved if amnesty is not provided."

This is the ultimate travesty. "Assessments and compromises" without collection are a waste of time and money by the FMC and an affront to the lines who complied with the law.

I want to particularly take exception to the statement expressed by Mr. Hiltzhimer of Sea-Land that he is convinced "*** that every carrier, forwarder, shipper, and consignee, whether silently or vocally in opposition, really

desires and would welcome adoption of the provisions for amnesty." This is an arrogant and insulting statement which is susceptible of being interpreted that somehow all have been as guilty as Sea-Land. I resent this inference, and I am confident that other carriers and our good customers will feel a similar reaction. Not once have I heard any other carrier, forwarder, shipper, or consignee endorse this amnesty proposal-only Sea-Land!

RIGHT OF INDEPENDENT ACTION

The proposal by Sea-Land that all conferences be required to permit independent action by conference members is not one designed in any manner to eliminate rebates. The essence of a rebate is that selected shippers or consignees are given something extra in the form of a discount below their competitors. Whether the rate is a conference rate, a rate of the carrier under independent action taken within the conference, or the rate of a carrier operating independently outside of the conference, makes no difference. It is still subject to being rebated where the carrier desires, in times of overtonnaging, to obtain the additional advantage permitted by the rebate.

Another factor which I think must be taken into consideration is that rebates need not be paid to the corporate entity which is the shipper or consignee, but can be under-the-table payments to traffic managers, freight forwarders, or other persons within the shipper/consignee organization who have the ability to influence the selection of the ocean carrier. As Mr. Hiltzheimer testified, there are a "lot of gimmicks" to rebating.

A particular problem with the use of the right of independent action lies in the area of possible, and even probable, prior compromises made between carriers and shippers. In effect, a predatory carrier bent on monopolizing a trade could thus obtain prior commitments from favored large shippers before revealing the intent to exercise the right of independent action to other conference carriers. The results could be disastrous to the conference system.

The plain fact is simply this, the independent action suggestion will not inhibit, in any manner, rebating. It probably would destroy the conference system which has already been substantially weakened as a stabilizing instrument in

our ocean commerce.

This, of course, could be a most useful tool for Sea-Land which has already identified itself in these hearings as being first in size and profit among U.S. carriers. With this economic strength and the right of the independent action, Sea-Land could effectively control any of the conferences of which it was a member. When this is coupled with its other suggestion that all carriers in any trade be required to be members of the conference in that trade, it takes little imagination to see that Sea-Land is reaching here for the ultimate control of all of our ocean carriage.

MALPRACTICES IN THE BRAZILIAN TRADES

Reference has been made to the one occasion on which the Commission has been able to demonstrate actual malpractices in the form of rebates in our foreign commerce. This, of course, was in the Brazilian trades and dealt with a problem in which Delta was vitally involved.

Delta became aware that there were obvious rebates being paid to our very substantial detriment in this most important trade. However, we did not revert to countering the rebates of the other lines with rebates of our own, in the manner which has been suggested as being the only basis on which a U.S.-flag carrier can meet rebating.

The problem was referred to the Federal Maritime Commission, the fact of rebating was determined by the Commission and all malpractices have been apparently eliminated through subsequent pooling agreements entered into be tween the parties engaged in that trade. The law was effectuated, not violated, to correct the problem, but required 3 years of patient effort, at considerable cost to the honest carriers.

THE GUATEMALAN PROBLEM

The Guatemalan Government instituted actions which precluded Delta from participating in the trade to that country which we brought to the attention of the special representative for trade negotiations under the Trade Act of 1974.